\section{Introduction} 
\label{sec:Introduction}

	Arrow et. al. (1) suggested: ``... different payment mechanisms, such as bundled or global payments and capitation...'' first, among their  recommendations, for building more efficient health care (finance) systems. Similar insurance risk transfers occur in the Prospective Payment Systems, Diagnosis Related Groups, Global payment programs, Episode based payment programs. We will refer to all insurance risk transfer mechanisms generically as "Professional Caregiver Insurance Risk" (PCIR) but readers are encouraged to consider global capitation, the most familiar as the paradigm insurance risk transfer. 
	
	Risk managers have too long failed to address whether PCIR is efficient enough to accomplish this goal. If not, the increased use of PCIR, bundled payments and similar risk transferring mechanisms, will further compromise our health care (finance) systems. Efforts to compare PCIR and fee for service models are difficult because they rarely exist apart in otherwise identical settings. Confounding variables in different sites and spillover effects in the same sites, leave most research inconclusive at best.(2-6) Understanding the true nature of the risks their facilities should be a focal concern for all risk managers.
	
	This paper starts ``up-river,'' addressing the inefficiency of PCIR by comparing the operating characteristics of small and large insurers. PCIR usually involves large, risk transferring entities (e.g. Managed Care Organization, Insurer, Medicare, or Medicaid) passing insurance risks to many smaller, insurance risk assuming, provider organizations, such as a physician practices, hospitals, long term care facilities or home health agencies.(7-15) Hence, the viability of PCIR hinges on whether large and small insurers are equally profitable, subject to equal risks of operating losses, and equal probabilities of insolvency. For PCIR to be viable approach, small insurers must: Be no less efficient than large insurers, No less profitable, Incur operating losses no more often, and have no higher risks of insolvency than large insurers. We shall show that this is not the case.
	
	The harms PCIR causes are always most severe at the level of a single provider and a single financial evaluation period. The smaller the insurer/provider or the shorter the evaluation period, the more inefficient the insurer/provider becomes. Small insurers operating results are more variable than large insurers, so during each financial period some insurers or providers will have marked deviations from average costs. Some insurers and providers, when evaluated on the basis of their most recent costs, will look very bad, despite the fact that they are efficient caregivers and provide high quality services or care. 
	
	We can compare the performance of large and small insurers using statistical sampling theory, risk theory and financial analysis.(16-23) This paper demonstrates that PCIR mechanisms are too inefficient to extend and that risk managers should be alerting their organizations to the risks they present.
